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Two groups of bitcoin Investors sell on the rise as U.S. inflation lifts prices to nearly $65,000
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- DeepHorus
Bitcoin surged toward $65,000 on Wednesday after softer-than-expected U.S. inflation data boosted risk appetite, but on-chain signals reveal two key investor groups are selling into the bounce, raising questions about the rally's sustainability. The cryptocurrency climbed to nearly $65,000 from $61,500, with most gains occurring following the release of the June consumer price index (CPI) report, which showed headline inflation rising just 3.5% year-over-year, below the 3.8% consensus forecast. Core CPI, excluding food and energy, came in at 2.6% YoY with a flat monthly reading, easing fears of further Federal Reserve rate hikes and sending the dollar index lower.
According to blockchain analytics firm Glassnode, long-term holders (LTHs) — wallets that typically hold coins for at least five months — are capitulating, using the price bounce to sell their coins at a loss rather than holding through deeper drawdowns. These investors, who bought near cycle highs last year, are realizing losses at a spiking pace, signaling a lack of conviction in the recovery. Meanwhile, short-term holders (STHs) who accumulated coins near recent lows are now taking profits at a rate exceeding $4 million per day, reminiscent of selling waves seen in May when Bitcoin briefly reached its 200-day average above $82,000.
The simultaneous selling from both groups is creating overhead supply exactly as the market tries to break higher, suggesting that conviction remains shaky among investors still underwater from earlier in the cycle. Analysts at Glassnode noted that cycle-top buyers are using the relief rally as an exit opportunity, locking in losses at a smaller margin than the sub-$60,000 lows allowed. The pattern is consistent with exhausted conviction among underwater long-term holders, while short-term profit-taking adds further sell-side pressure.
The inflation data also included a lower-than-expected producer price index for June, which compounded the dovish narrative. Treasury yields dropped alongside the dollar, providing a tailwind for risk assets including Bitcoin. However, some observers remain skeptical about the durability of this bounce, arguing that the slowdown in inflation was primarily driven by a 10% drop in gasoline prices in June, which has since reversed.
Ryan Lee, chief analyst at crypto exchange Bitget, warned that the CPI number is a "June photograph" while July is developing differently, with Brent crude oil hitting a one-month high amid escalating tensions in the Hormuz strait. "Markets are rallying on a June photograph, while July develops differently, and the July print will be the first to carry the war premium," Lee said in an email. Jasper De Maere, OTC trader at market maker Wintermute, echoed caution, noting that the Fear & Greed Index only moved from 22 to 25, still in "Extreme Fear" territory, and that U.S. military strikes on Iran continue.
Despite the positive headlines, De Maere emphasized that one soft CPI print against an active military escalation does not constitute a durable regime shift in risk appetite. The combination of selling by both long-term and short-term holders, along with the potential for renewed inflation due to rising oil prices, suggests that Bitcoin's path above $65,000 may face significant resistance. Market participants will now watch for the July inflation data, which will incorporate the impact of higher energy costs and geopolitical tensions.
Looking ahead, the sustainability of Bitcoin's rally hinges on whether the selling pressure from these investor groups can be absorbed by new demand. If inflation remains sticky or oil prices continue to climb, the Federal Reserve may maintain a hawkish stance, potentially dampening risk appetite. For now, the market remains in a delicate balance, with technical resistance near $65,000 and sentiment still fragile.
